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Dreaming of a Bolthole by the Sea? Here's what you need to know about owning second homes
- AuthorEmma Gilroy
There are few topics more contentious when it comes to property than second home ownership.
Britain faces a chronic housing shortfall, while many of us daydream about owning a pretty, whitewashed bolthole by the sea at some point in our lives.
If you are in the market for a second home, either as a holiday home for yourself, or as a buy-to-let option, there are a number of things you need to consider.
New stamp duty rates, introduced in April 2016, mean that those buying a second home face higher rates of stamp duty land tax than those who are buying their primary main residence. For example, as a second property buyer purchasing a property at £120,000 you would pay stamp duty land tax at 3 percent, but if it was to be your own residence the rate would be 0 percent. Effectively, an extra 3 percent of stamp duty land tax is added to each price bracket, with the highest rate of stamp duty land payable being 15 percent on any amount above £1.5m.
However, anyone who owns one property and buys another will not pay the extra stamp duty surcharge if they are changing their main residence. So, if you are selling your main home and buying another main residence, you will only pay the standard rates of stamp duty.
This exception includes buy-to-let landlords, who can own several properties but pay no extra tax on a new purchase, as long as they are replacing a main residence. But you must live in a property for it to be counted as your main residence. Also, home owners who pay the higher rate of stamp duty can claim it back if they sell their main home and use the purchase property as their main home. This must however be done within three years of the payment of the higher rate of stamp duty to qualify.
There are other impediments to buying a second home, which are being imposed regionally.
The Welsh Government has ruled that local authorities within its borders can charge second home owners more Council Tax and, unsurprisingly, Councils have taken to this plan with some enthusiasm. Some have pushed the tax up by a quarter, some by 100 percent. Gwynedd Council for example, which has the highest number of second or holiday homes in Wales, has raised its Council Tax bill by 50 percent for second home owners.
This approach has been criticised by some as being a tax on wealth, though many communities have seen people being priced out of their locale by second home owners, who then leave their properties vacant for much of the year.
In one of Britain’s most popular coastal towns, St Ives, in Cornwall, would-be second home owners face a ban on buying new-builds. A recent referendum saw residents vote for new rules which may see new builds bought solely for full residential use. However, reports from some estate agents in that area are suggesting that this move has resulted in developers opting to build new homes in neighbouring towns, instead of St Ives, which is not, I’m sure, the outcome local residents were hoping for. There are reports too that this policy has prompted a rush of buyers snapping up second homes while they were able to, which pushed prices up. Again, this is perhaps not the outcome expected.
As you can see, this is a delicately balanced issue and it is important to weigh all your options and to examine your budget carefully before you make a decision on a second home. It is worth noting that stamp duty is not payable on caravans, mobile homes or houseboats – so if you want to test out the holiday home concept without committing all of your savings, that is an option you might consider!
For further advice, please contact our specialist property solicitors in:
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